India's credit growth shows no signs of picking up despite recent RBI rate cuts

India's credit growth continues to decline and is now growing at less than 10%, the lowest rate in a decade. It has shown no signs of picking up despite recent rate cuts as transmission of policy rate action to lending rate remains weak.

The moot point, however, is whether even a cut in the lending rate can spur investment activity. Anecdotal evidence suggests that corporate investment is picking up only very modestly. The pace of progress in reviving stalled projects remains painfully slow, and despite its best intentions, the government's ability to pump-prime the economy will remain limited. 

According to Societe Generale, The pace of structural reform remains key, and in this regard, the ball lies in the government's court. So far, progress on the reform front has been slow, fiscal consolidation apart.